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IRS Targets Rich Taxpayers: Audit Rates Up 80%

By

Robert Frank

Mar 22, 2011 1:50 pm ET

The rich not only face calls for higher taxes. They also face more audits to make sure they pay.

Everett Collection

According to the latest 2010 IRS Data Book, audits for the wealthy surged in 2010. Among taxpayers who reported $10 million or more in income in 2010, more than 18% were audited. That is up 80% from 2009, when only 10% were audited, and in 2008, when 9% were audited.

The rates were higher for other high-income taxpayers, too. The report showed that among taxpayers who reported $5 million to $10 million in income, nearly 12% were audited, compared with 6% in 2008. For those earning $1 million to $5 million, audits rose to 7% in 2010 from 4% in 2008.

Still, the $10 million or more crowd–which represented .01% of all returns–is clearly the fattest target, since that is where the money is.

Some may see in the audit rates a Democratic plot to attack the wealthy. But the increase is probably owes more to the IRS’s new Global High Wealth Industry Group: a kind of tax-agent SWAT team targeting wealthy tax evaders. The group is staffed with “A-list” examiners who are trained in coordinated corporate audits and will focus on the entire web of entities connected to the wealthy taxpayers–from business entities to offshore trusts.

According to reports, the IRS already has hired international examiners for the team and is considering adding economists, appraisal experts and industry specialists.

It is unclear how much revenue the new effort has managed to snag. But at a time when government is in increasing need of funds, the audits of the $10 million plus crowd are likely to continue rising.

Do you think the new task force is welcome tax justice or capricious wealth redistribution?